How We Helped a $11M Revenue Clinic Group Sell for $8M w/ Soroush

This year has been a really interesting year. We're now at just around $30 million in total transaction volume. We'll likely be closing out the year at around $40.

How to get smarter in business and in life. This is the question, and I'm on a journey to get you that answer. I'm going to interview the world's top entrepreneurs and deconstruct their winning secrets. Going to talk about everything from marketing, money, and living a bucket list life. I'm Rick Lau, healthcare entrepreneur. I grew an in my 127 locations in my 30s. Welcome to the Clinic Boss Show. All right everyone, welcome to the Clinic Boss Show. Today we got a special guest, a good friend of mine, Soroush Peyvandi. He is a clinic owner and he is our M&A expert at Clinic Accelerator, you know, and so he looks after a lot of, um, the buying and selling activity within the, within Clinic Accelerate. So Soroush, welcome to the show.

Thanks, Rick. Happy to be back. Round 2.

So I'm going to ask you, Soroush, is this a good time to sell or buy a clinic?

I think it depends on who you're asking, right? But honestly, I think it's, if you have the right structure and setup, I think it's a great time to put it on the market. Obviously, depending on how the economy might look. There's a lot of questions that still are unanswered, especially with what's going on with US, Canada. You know, it is having impact on obviously the markets. As a buyer, it's again, this is kind of an interesting time as well. There's a lot of activity right now where people are looking to build another large platform. A lot of these financial buyers are trying to get into the game again. And, you know, think for the last, you know, year or two, because they were been waiting for the economy, there's a lot of dry powder or a lot of cash waiting to be deployed. And so, you know, everyone's pretty eager to get in. So that's why I think it's kind of on the buyer side. If you're a financial buyer listening to this, you know, might be a good time for you. Uh, but also as a seller, for sure, uh, you'll be able to take advantage of that too.

Yeah, it's interesting you say that because, you know, if you look at the last like maybe like 3 to 4 years post-COVID, everything got way more expensive, right? It got way more expensive to build clinics, construction costs, labor costs. Um, and so starting up a clinic now is way, way more expensive than, you know, 4 or 5 years ago. And so for the, for the, I'm gonna say more aggressive or the owners who are looking to scale right now, it is highly cost effective to buy a clinic right now because you're buying a clinic with a cash flow, right? And you lower your risk in terms of startup risk, right? Because you know how many years that takes to like break even in a practice, right?

Yeah, 100%. And we're getting, that's why I think we're getting a lot of attention on a lot of the listings that are under $500,000, just because everybody pretty much knows now if you're looking at building 2,000, 2,500 square foot business in, in the healthcare space, you're, you're probably going to spend over $300,000, over $400,000, depending on how nice you want the clinic. Yeah, nothing's getting cheaper right now, especially with, with tariffs. They're putting a lot of pressure on materials, on labor, on, The shortages happening in different places still, unfortunately, from post-COVID.

What would you say is a good construction cost, you know, right? Like what's a good benchmark, $100 a square foot to build from start to finish, including equipment and supplies and all that stuff?

Yeah, again, I'll kind of give as generic as possible, but it really depends if you're building in Toronto, Vancouver, or Calgary, or Manitoba. It's gonna be different, but I think on average you can probably look at something between $150 to $250 a square foot. If you stay around $150 a square foot, I think you're doing pretty good. That's definitely on the cheap.

Now, is that like a really beautiful clinic or is that just bare bones?

It, it's gonna be a fairly traditional standard clinic. If you're looking at putting a lot of premium stuff into that, you're, you're gonna be going north of half a million. Okay. Just, just based on obviously the labor and the talent you need to build something like that is, is a lot more expensive these days for sure. So you're looking at— so for a 2,000, uh, 2,000 square foot clinic, it would cost you, you know, what, at least probably $400,000 to $500,000 if you're going to be building a nice clinic, right? It also depends. I think a lot of people are moving towards this model of building big gym spaces, so that might actually help offset some of the cost. But, you know, then you get into the whole revenue per square foot debate and how you maximize space. So that's— there's kind of two sides to that coin, but it depends on the model you're also using to build out a clinic.

Yeah. And so if you're, if you're going to drop like half a million dollars to build a clinic or $400,000, say $300,000, $300,000 to $500,000, that's right. You may want to consider buying a practice that already does $300,000 to $500,000 in revenue, although it may be break-even. Right, on a cash flow standpoint, right?

Yeah. And that's exactly kind of how my career really panned out because there's a lot of opportunities out in the marketplace where, you know, for whatever reason, an owner wasn't able to get the clinic to a certain point where it was doing like $300,000, $400,000 in profit. It was breaking even. And we're talking about like 60%, 70% of the market is in this bucket because it is hard running some of these clinics. But when you have the right tools and the right people leading that business, that's when it starts to grow. So when you have a really motivated buyer who wants to learn all these different principles to put into the business, they get a clinic that they would've spent $350,000 on anyways to build it out, but they get their staff, they get the caseload, they get all these different things with it. And now all they have to do is just clean up some of the structure within, add a couple people, and bam, you've made 3 to 4 times your money that you've invested into it right away.

Yeah, like I said, I think this is a journey that you went through. This is the same journey that me and Paul went through, you know. And I think something more recently, I think we spoke with that a couple of months ago, was that the first clinic you bought, I think, was doing maybe like half a million dollars, you know, over a course of 2-3 years. Like, you got it like to like be over $2 million, right?

That's right. Yeah. Yeah. It's, it's the principles are the same across the board. It's just a matter of having the time, energy— energy is also important because a lot of people are just tired of it and they don't want to put in the time, energy.

So a boomer like me shouldn't be buying a business unless I'm surrounded with like Gen Zs and millennials like you?

I mean, listen, the age is not a factor. It's more just how defeated you feel after running a clinic. And so if you're at that point where you're like, I don't want to do this anymore, um, and somebody can come and help you, there might be a scenario where you can partner with them too, right? And they'll come in and buy into the business at 70, 80% and, and help you grow it.

Yeah. Who, who, who's buying clinics right now? Because you deal with a lot of buyers right now and sellers, right?

Yeah. So I mean, you have the 3 types in full force right now. Individual buyers. So people who are, you know, clinicians that are wanting to get into the clinic owner space for the first time, or clinic owners that have 1 or 2 clinics right now that are looking to try to get maybe, maybe 1 or 2 more clinics. So, So those are, I would categorize them individual buyers.

So are these like physical therapists, chiropractors, massage therapists, like that, that bucket?

That's right. So you have the physios, you've got chiros, all these clinician owners. We also have non-clinician individual buyers, people who are quote unquote investor types that are looking to buy a business in healthcare. So those are also in the individual bucket that I would put. And then you have the financial buyers. So right now there's been a really interesting activity. There's a lot of groups trying to push to form a large another large platform in Canada, just because we know obviously the space is saturated with obviously a few large players. So they know that there's room for another platform to be formed. And so there's a lot of these financial private equity type of buyers looking at the space and having a lot of good conversations. And then of course, we have the strategics, right? The larger corporations that are looking to add clinics to their network. And obviously that's another buyer too. So all three are actually in full force. It's really interesting to see how much activity there is right now. But really, really, but really different in how they approach the whole process.

Hmm. Interesting. And, and, and just, just so we get the nomenclature right, you mentioned platform, like, what is a platform?

So, so right now, if you think platform, you're looking at more than 5 to 10 locations minimum, right? Obviously the true platforms right now have at least 100 to 200 clinics in their network. And so a lot of these financial buyers are looking to create a new platform with different philosophies. They might come in with a philosophy of, I wanna, you know, focus on this type of clinician or clinic network, or some, maybe they're physio only, or they wanna do chiro only or whatever. Their philosophy is. So that's what they're trying to do. So they're starting off with buying maybe 5, 10, 15 clinics at one time and then forming that initial group and then continuously acquiring until they get to 100, 200 locations or whatever their long-term plan is. And it's gonna be different again based on—

Yeah. So a platform is pretty much like a network of clinics, whether it's a national network of clinics or maybe a regional, whether it's a specific province or like, or state, right? you know, or like a specific area, right?

You know, so that's right. Yeah. Yeah.

Okay. Um, so we've helped a lot of owners sell clinics, um, this year. Um, and so Soroush, like, uh, what, uh, what type of, uh, how much money have we helped, uh, owners, uh, this year walk away with, uh, selling their practices here so far?

Um, so this year has been a really interesting year. We've, we're now at just, uh, just around $30 million. In total transaction volume.

Um, and transaction volume is like, you know, we've helped, you know, we've helped create $30 million of like payouts to practice owners that sell, right?

That's right. Yeah. Yeah. And obviously it's a large number of clinics and groups, but, um, and we'll likely be closing out the year at around $40 million. Um, okay. We're looking at right now. Yeah.

Cool. Yeah. And I think, you know, if we add this, you're at $40 million, you know, and And I think, you know, if I look back a couple of years ago with us exiting as well, like we are well north of like $100 million of transaction volume, right? So I think we come with a pretty deep, you know, bench of experience with this entire ecosystem of buying and selling clinics with all the major players and all the different sellers and buyers, right?

That's right. Yeah. And what's interesting is because, you know, we, clinicians and been through the process and really understand the inside and out of the business is I feel like the transactions that are happening right now, the conversations are a lot easier, right? In my opinion, at least, right? I mean, you know, that could be debatable, but there's a lot of really key points in the whole process where having that understanding of that business has helped make sure that we create obviously a really effective conversation so that it does get to a point of closing. 'Cause anything can happen on the 11th hour that kills a deal. Yeah.

Yeah. And we talked about this earlier. What would you say is the 3 types of clinics that people are selling right now? Right?

Yeah. So yeah, if we were to categorize like the whole, you know, marketplace right now into 3 buckets, it would be clinics that are selling for, let's say, $200,000 to $400,000. So they're smaller, smaller, one clinic situation. We've got the medium size, which is essentially between $1 to $2 million. Million price tag for a clinic. And then we've got obviously much larger groups that are $6, $7 million plus for each group that is essentially going through that process.

Right, right. You know, and so, and, and maybe you could go through, uh, because I get a lot of questions, uh, in our community about this, like maybe go through the process of, um, this, uh, what is the process of like selling your practice? What does that look like in your world when you talk to a, like a practice owner?

Yeah, so, you know, there's two marketplaces. There's a private marketplace and the quote-unquote public marketplace. And so I'll kind of break it down into the two categories. So on the public marketplace side, you know, we'll obviously have a conversation. We'll talk a little bit about valuation or where a price point might land. We want to make sure there's obviously agreement there. If obviously the clinic you think is worth way more than it actually is, we need to have that frank conversation. Once we have agreement on where it might land, then I'll obviously we'll go into a questionnaire. The questionnaire essentially is going to get a lot of details from the business and things around your marketing, operations, financials, etc. We'll take all that information, put it into a presentation deck we call a confidential information memorandum or CIM, and that's what we actually house for to be sent to buyers that might be interested. And then once obviously that's complete, then we have the listing go live, we market it, as much as we can, like crazy. And we wait for the NDAs request to come in. And then once those NDA requests come in, you know, we start sending out the package to the, to the buyers, and then we get into the conversations. And typically what we'll try to do is try to get multiple buyers at the table. So we have a little bit of a competitive bidding process. And in that process, then, you know, we'll, we'll choose the best letter of intent, which is essentially you're signing off, I want to work with this person now, go into due diligence. And in diligence, hopefully by then we're pretty firm on what the price looks like and we don't find any big red flags in diligence. And if that's the case, then we'll go ahead and just do all your basic diligence stuff with making sure you don't have any taxes, no skeletons in the closet, everything looks good. And then you end up closing the deal and then transition happens from there. Yeah.

And typically how long is this process taking, Soroush?

So it, it depends on the part— on the private marketplace, it can happen a lot quicker because the deal size is a little bit smaller. Uh, you might be able to do the entire process, I would say, within 3 months, right? And that's start to finish. So if we get all the information back from the seller pretty quickly, get the presentation done pretty quickly, put on the marketplace, diligence might take maybe 6 to 8 weeks on a faster scenario. and so that would essentially help us wrap up within 3 to 4 months, let's say. On the, on the private marketplace, obviously the deal size is gonna be much larger, and so there's a lot more, uh, back and forth that's gonna happen. And, uh, you, and there's a reason you actually want a little bit of a back and forth within the, uh, private marketplace, because in that scenario, you want everybody to really understand that business, um, and know what they're getting or what they might be missing out on if they don't put in a really strong offer, right? And so that is a huge difference between the public and private side. On the private side, the check sizes are like pretty large. And so you want the buyer to really, really understand that business.

What type of check size are we talking, Soroush? We're talking about $10+ million like check sizes, like what?

$2 million per clinic type of scenario, right? So if you have multiple, you got $7+ $10+ like $10+ million. So these are large amounts of money that's going to be moving around. And so buyers need to also be confident. So our job is to make sure that they really understand this business well, and they understand how it's going to help with their group or the platform, whatever they're doing with the business, right? Yeah.

And just to clarify, your role is to help facilitate as an advisor to, to put the best possible, you know, deal and find the best buyer with like multiple bids to get the highest offer, right? Is that kind of your role, Soroush?

That's right. I mean, like the big role is the storytelling, right? I think as an advisor, you have to be able to craft a really good story so they understand the business well, right? You have weeks to help these people understand this business really well. Otherwise they may not be interested or they may have a certain thing that might be overlooked, whether it was a contract or a really interesting system they've got in the clinic, or obviously their profits are, you know, very strong and their revenue is very diverse. Like there's a lot of different things that buyers are looking for. And with the process, especially on the private marketplace, you know, we've really gone to understand what buyers are looking for. And so when we see those in the businesses that we're putting out, then we try to highlight that so they understand that, hey, if you're looking for a really young, strong leadership team, then we've got this young, strong leadership team in this business that's able to obviously help continue to work with you, continue to transition, and they might actually have opportunities for future growth within that network too. So you have to understand who it is. What you're highlighting, I think that's really the key to consider, right?

Hey, yeah, no, that sounds incredible. And so, and maybe you could dive deeper, maybe you could give a little more clarity on this. Like what is the difference between a private and like a public marketplace? You know, like, you know, what does that mean for people who don't know what you're talking about, like Soroush, right?

So, you know, I always kind of, I give the example in real estate because it's a little bit easier to understand. So there's realtor listings that you'll see on MLS versus pocket listings. Pocket listings, and if a realtor is listening to this, hopefully I don't get skewered, but pocket listings are these listings, let's say a celebrity wants to sell their house. They don't want to be known and they don't want to be in the spotlight or they don't want a listing or there's news around it, right? So they just do it privately without even hitting the public marketplace. So they'll talk to different buyers, different individuals, and the transaction happens behind the scenes essentially. And so that's what the private marketplace is. Again, because the groups are larger, there's a lot more significant check sizes in this entire pool. We make everything really private and confidential in a way that we're going direct to the buyers that are within that pool. And we put this out, and obviously, that's when we gauge interest, and we get into conversations and eventually make a deal.

Yeah. And the buyers in this case are the financial buyers, whether it's private equity, or maybe some of these family offices, or some of the strategics who have, you know, the big, the big checks and the big wallet sizes, right?

100%. So that's exactly what was going to highlight another big difference is the buyer pool inside this private marketplace is very different than the buyer pool in the public marketplace. So you might, for example, will have hundreds of buyers, thousands of buyers in the public marketplace, but you'll have probably a handful, maybe less than 10 or 20 or 30 buyers that are going to be available in the private marketplace. And they get quote unquote qualified based on obviously their capacity to be able to give out those check sizes and their willingness to as well. Sometimes they might have the capacity, but they may not be willing. So then obviously we make a decision, are you going to be a part of this pool?

That's right. And, and this is why, like, uh, these, these private deals, you won't see it, um, us promote it on, like, emails or social media, um, because there's this level of confidentiality, uh, that these bigger, um, groups, uh, want to maintain, right? You know, right? Plus most people won't qualify for them, right?

Yeah, exactly. And, and to be a listing in that group, you— again, we also qualify the clinics. right? So you have to hit a certain number, you have to have certain profitability, because again, all of the buyers in that funnel are expecting a certain level of financial strength, certain level of operations, certain level of systems in place, etc. Like they're expecting something and we need to make sure that we maintain that same quality as well.

Okay. All right. Let's talk about the buying process. So what is the, what is the process of buying a clinic from a buyer's perspective?

Of Soroush Peyvandi? So again, let's talk for both public and private marketplace. So on the public marketplace side, we've got obviously all the listings on the website, or you can see them on social media, your, your social media, Rick, or on LinkedIn. And you'll, if you're interested, you click on the button and it'll send you to an NDA link and you'll sign an NDA, you wait for the seller to sign it. Once that's signed, then you get the information. And once you get the information, you're evaluating to see if this this is the right fit for you. If so, if there's any other questions or material that's needed, we'll go back and forth, we'll help with that process, you'll be involved with those conversations. And then once you're interested, you can submit again an offer through a letter of intent. And on the letter of intent, you'll include your purchase price, you'll include the terms that you're looking at, how much cash you're going to put down, what's included in the, in the purchase. Again, a basic understanding of what things are going to look like so that you know, you can hopefully convince the seller to choose you as a buyer, and you can, you can then go into due diligence and hopefully close the deal. And on the private side, the private side is again a little bit different. You have to be essentially invited to that group. You get qualified, obviously. Once you're in though, anytime one of those private listings are going live, you'll get a direct email about, you know, the profit, the profit margin, the profitability of that business and the location. And if you're interested, then, you know, the next step is for you to submit your interest for an NDA, and then we'll go through the NDA process and again, submit the package to you with the financial. The package is a little bit more detailed on these ones because again, they're larger deals, but we'll give access to our data room, which we'll share on email and go through the same process. They'll evaluate, analyze, and get to a point of a letter of intent. Similar thing, hopefully you convince the seller to choose you. And then you go into your diligence process and close the deal.

Okay, you make it sound so easy and it's so fast.

It can be easy and fast. Again, as long as everybody is organized and everybody's on top of things. Things happen though, you know, we've had in our buyer pool people are, you know, replacing people or things are moving. So then everything slows down because they don't have leadership in place, right? And then once that goes back, then speed goes back up. Or on the seller side, you know, you're— if you have everything organized well, your books are clean, you've got everything set up well, then the analysis of that is also pretty easy, right? So it can make the process pretty quick if everything's nice and organized. Part of the process of what we do is try to help organize a lot of this stuff and clean it up and make it really presentable so that it's easy to understand, easy to read.

Yeah. Hey Soroush, can you, can you maybe share an example of maybe a recent small clinic sale that closed recently and what worked and what didn't?

Yeah, so the one of the, one of the ones we had closed recently, this was priced at about $120,000, $130,000. So pretty small deal.

So it's like a solopreneur practice, right? Pretty much, right?

Pretty much. Yeah. They were, they were doing obviously not a ton of revenue breaking even, but really great opportunity, fairly large clinic, 2,300 square feet. And was everything was new in the building. The owner honestly just wanted to get out of running a clinic. And so they, they just wanted the right partner. What worked really well in that scenario was, you know, we had obviously a group of buyers and we kind of already knew people interested in that area. So obviously we had put it out and we also directly reached out to some of those individual buyers that were looking. And immediately within about a week, we got two letters, letter of intents and two LOIs. And so now immediately started a little bit of a bidding war between the two. The price went up. By about 10-20% through the bidding war. And the seller chose this person and they were working with their accountant and lawyer. What almost, you know, maybe negatively affected the deal was the lawyer. It was an asset sale. And which, from a legal perspective, it makes sense. Like they wanted to not provide any financials because you're just buying the asset. But however, you know, obviously, when we look at this whole thing. It's important for the whole picture to be present for these people buying the business. So it's not that the revenue is going to disappear. You're not just buying the furniture, although again, realistically, in an asset sale, that's technically what you're actually buying. But we kind of price things based on the revenue a little bit, based on obviously the potential. And so, but the, the seller was okay to share some of that information, which helped the buyer become even more confident through the diligence process. And the whole thing took about 8 weeks. Okay. Wow.

And what was the— you said it was 2,300 square foot and— Yeah.

Yeah. 2,300 square foot doing about $250,000 of revenue.

And it sold for $150,000?

$120,000.

Could you build a clinic at 2,300 square foot for $120,000?

Not in that, for sure. Right. But again, like it's funny because the— expectation of the individual was actually— they were hoping to get like $80,000 or something, $90,000. So obviously we just priced it appropriately based on what the opportunity was. And, um, and there's obviously— there is some level of risk with a practice that small, so you have to bake all that into how you price the business, right? Yeah.

Yeah. Wow. And then, um, you know, one thing I hear a lot is that, you know, some of these owners who had a smaller practice, but they spent a lot on renovations, right? And then when they look at because the business doesn't have the cash flows, don't make a lot of money, like it's actually also not worth that much, you know? How do you set expectations of what actually what your business is worth given how much you spent on renovations or what you think the business is worth, right?

Yeah, that happens all the time. And, you know, we hate to be the bad guy to say you might not get your full investment back at this point. So we always give two options, right? If you're not at that point, obviously we'll recommend going down and actually developing the business a little bit more before putting it on the marketplace. But if somebody is like, no, I don't really want to go through that path, I just want to sell it now, we can price it and we can obviously, we'll have to come up with something reasonable, right? You're not going to, you can't price something in a way where it's so unreasonable that people are just going to look at it and say, I don't, this doesn't make any sense. You can't be so far off from what the market will actually pay. And so the seller has to make a decision, right? Do you want to continue to grow this, get to that number, which is totally possible. You just have to put in that time and energy for for the next like 12 months at least. Or if you're hoping to get it just off your hands, then we can come up with other structures. Maybe we get creative, maybe we ask for earnouts, maybe we ask for, you know, partial exits or something like that. But there's ways we can mitigate to try to get them to that as close as we can to that sale price. But what doesn't work is just overpricing something and hoping that it sells. Because people, people will do the math, they'll talk to their accountant, they'll talk to people. We've seen it happen that if something is priced too aggressively, You know, there's a lot of back and forth and sometimes buyers will walk away because of that. Okay, cool.

That was a good example. That was a good share. Yeah, there's always this, yeah, mismatch of expectations of what your clinic is worth versus what the buyers want to pay, you know? And at the end of the day is like the market price is what dictates like, you know, the value of your business, not what's kind of like in your head, right? Or even what your accountant says, to be honest, right?

Totally. And this is why we have this conversation first. And it depends as well. If you're, if you, we have a conversation, let's say I have a conversation with you, Rick, right now about selling your clinic. And I tell you it might be around this price. And then you're like, let me think about it. You come back in 6 months and then you say, okay, I'm ready to go through the process. The market could be totally different in 6 months. We've seen how things can quickly change the marketplace with things like tariffs, right? So you have to remember that this market is very fluid and things are moving up and down very quickly. So if you're thinking about wanting to go through the process and we talk about a number, best to go through it then and there rather than waiting like a long time and then hoping that that same thing sticks around. Because it might go up, it may go up too, right? Maybe the market gets heated a little bit more or maybe the market cools. We don't know.

Or maybe your client does better too, right? You know, because you implemented like some of the strategies, like you know, through your podcasts or, or emails or social media, right?

Totally, 100%. Yeah, so a lot of things could change for sure.

If you enjoy my content, I write a clinic owner newsletter. I share with you what's trending right now in marketing, selling your business, recruitment, operations, front desk, and more. Become a better clinic owner and join over 22,000 clinic owners who get this free newsletter each week. Go to clinicowner.com to sign up today. But let's just say, like, if you're not one to do the work your numbers likely won't change, right?

So, well, yeah, exactly. That, that was the example I was giving. You haven't done anything, and the 6 months later you're like, now I want to sell this price. If the market's tanked for some reason, then obviously it's going to be a tougher time. Less buyers that are willing to pay, banks are not going to fund it. There's a lot of factors.

Yeah, I think the best analogy is looking at a, like, a real estate, you know, right? Um, looking at a, like, a rental property, right? You know, are you going to renovate that basement? Are you going to renovate that kitchen, you know, or gonna renovate that bathroom, right? You know, but if you're not gonna renovate it, then a year from now or 6 months from now or a couple years from now, like it may be worth like the same or less depending on the market, right?

Totally. Yeah. 100%.

Yeah.

The market factors and influence, again, I'll underscore this one more time, is a very, very important thing to consider as you're moving through the, your process, right? So that's why it's important to have everything lined up as best as possible to give your chance, the best chance for your business. To sell at a reasonable price, at a good price.

And the market is what the buyer is willing to pay for. Is that right?

That's right. That's right. Yeah.

Because if they're not willing to pay for it, that's not market price. You know, like I speak to a lot of realtors, this is what they say all the time. So I'm just saying the exact same thing on this show. Let's share an example of a medium-sized clinic, you know, Soroush, that closed recently. Tell me what worked and what didn't work.

Yeah, so a good example was one of the clinics we had recently worked with on their transaction. So this clinic owner was actually super organized and that was very helpful for the process. So we got through the entire, you know, the prep process very quickly. And when we had listed it, obviously it was, we listed it for over a million and they had obviously very strong profits to back it up. And one of the things that was really critical here was the conversations with management. So one of the pieces of the process is after you listed, there's this management meeting that happens with buyers and the management team. And so that's where you can really put yourself on display. And that conversation went really, really well. They obviously talked about the future. They also, and this was truthful, this was authentic. They also mentioned that they're gonna be sticking around. They wanna help with transition. It wasn't one of those scenarios where they're like, I just want to get paid and then tomorrow I'm out, right? Because buyer— no buyer wants to really hear that because they're putting a lot of money and/or investment into this business. They want to feel like you're going to still support the process after the transaction closed. And so the, uh, that was really helpful in the diligence process. Again, very organized. They had a lot of the documents that the buyer was looking for, quickly submitted those. I think submitted over 80 documents within like the week. And, um, that's what allowed the diligence to go through very quickly. And that one I think closed also within like 3 months. So that was, that was a really interesting—

And what was on the diligent list?

So yeah, typically they're looking at, they want to vet to see if that revenue is there legitimately. So they'll ask for revenue reports, they'll ask for bank statements, they'll ask for payroll reports. Let's just see how much the financials—

And cross-reference everything just to make sure that like, hey, like, is there any— does it match, right? Is it aligned?

Right? Yeah. Because there are certain times where a bookkeeper accountant does something on the books and then something, there's a mismatch with your revenue. And then obviously we have to explain why that is. And a lot of times it's, you know, some sort of adjustment or something that wasn't added to the EMR. And then you go into the tax diligence. So they'll make sure that, you know, all the CRA money, legal diligence, make sure there's no claims against you, no lawsuits in play. And then they'll go through all the obviously contracts for all the clinicians, make sure those are good. They're legit. And essentially they're checking off all of these boxes to make sure that what we presented is the true reality of the business. And keep in mind, this— they've already done a site visit. So they've already— usually before an LOI, people will do a site visit and come see the business in person to make sure that also exists. But yeah, and then so once they go through the diligence, then they'll go into their purchase agreement and they'll just go through the back.

And how important is part of the due diligence is having maybe some of these operational metrics, like having a weekly scoreboard, like how many visits it does, how What is like the value of like a patient? Like how many assessments and all that jazz, right?

Yeah, it makes a big difference just because you're giving a lot of visibility to this company that's buying the business. And more visibility and better organized, organized visibility gives confidence to the buyers that what I'm seeing is what's actually happening. And of course you can even back that up with your revenue reports and everything. So having those system structures, your org structure, your role documents, it shows that, hey, we said we have this great team in place, but then when diligence comes, you have no role document, no work structure, nothing really to show for it, they're going to be, they're going to be a little, they're going to question, hey, was this actually true? Right? And so you don't want to create fear for either side, buyer or seller, through the diligence process. Yeah.

So in this case, back to this scenario, Soroush, like, what did it end up selling for?

This was about $1.2 million.

And what was the, what was the revenue on it?

The revenue was about $1.6 million, I believe.

$1.6 million. And do you remember the, the profit, the EBITDA on it?

Yeah, they were 1.3— sorry, not 1.3. 1.3.

That's amazing. This sounds like a software business right now.

No, no, 300,000, 320,000.

Okay, cool. And so was the owner pretty happy with the sale, the exit and the sell price? Yeah.

I mean, they were— so there were some scenarios obviously in the background where they wanted to sell. The owner was still young, obviously. Don't want to share all the private details, but they were looking for something, a good price, and to be done quickly because they needed to have the next phase of their life sorted out. And so they were pretty happy with the process, and obviously they're very happy with the buyer. And the buyer—

and how much was it? Like, how much was the cash up front versus the earnout, or was it all cash up front?

Uh, this one again doesn't happen all the time. I want to just be very clear, like, sometimes this happens, but most of the times this doesn't happen. They had all the cash up front.

Okay, so they got the full $1.2 million up front. But typically, depending on the quality of your clinic, quality of the earnings, and whether you have a management place and you're like, you got good trending operational metrics, you know, and everything supporting it. If you don't have all those things, typically there is like some type of like earnout, right? You know, right?

Yeah, yeah, typically you can expect 20 or 30%. Okay, yeah, yeah, on the larger deals you'll see 20 or 30%, um, and then on the smaller deals it depends, right? You might actually be able to get more of that cash down, or they might do something called vendor takeback. I don't know if, uh, you know, people have heard of that, which means essentially you're financing the, the purchase. So you are the bank, the seller, right?

The seller is lending that $500,000 paid over like 3 years or something, right?

That's right. It's not always the whole thing, but let's say a portion of that, they'll say, okay, $200,000, I'll let you give me in installments with interest on top. And then you have obviously agreements to make sure that's secure.

What percentage is that happening right now in the deals, the vendor take back? I love doing this back in the heydays, right? Like we were doing vendor take backs like amazing, buy a business at 2 times, And then half of it was like BTBs, right?

Yeah. Yeah. It doesn't happen as much. Obviously we're, we push so that they get more cash up front and as little TV as possible. Um, so we don't see it as often, but it is an option in a scenario where we need to get creative with a deal. Let's say we have a really good buyer, but they just, maybe their funds are a little bit more limited, but the seller really wants to work with them. Then we'll include that as part of the deal.

Okay. And then this clinic, what's the square footage on the clinic?

This one was $2,500, I believe.

Okay, cool, cool. And same thing, like a medium-sized clinic, you know, what is a— do you have a recent example of like a deal that collapsed and maybe like what went wrong with it?

Well, yes. So, and this is the only time that, and this is where we broke our process, right? This is really important where we had a scenario with a seller who— there was a very aggressive broker that came into the business, into the fold. They wanted to cut us out completely, right? And to me, whenever that happens, I tell—

what do you mean there's a broker?

Sorry, another— an actual real estate broker. So they were representing a buyer, they came into the fold, and they wanted to pretty much hijack the whole process, right? They came in with an offer that was better than the other offer we had. So this is where the discussion happened with the seller. And so again, they wanted to change the process to what they wanted to do. And we don't— we typically will say we're happy to work with anybody, but we have to be involved with the process because we are trying to back up the seller. But the seller insisted that let's just do the process the way they're doing it because they were getting an extra like $20,000 or $30,000. And again, we insisted on not doing that because we knew that it would lead to a bad outcome. Frankly, this broker on the other side was a bit of an asshole. And so you could immediately tell— You mean a real estate agent is like an asshole?

What are you talking about?

No, I don't think they're all awesome. My dad's a realtor. It's all good. But this guy specifically was just like, he was not being friendly at all. He was just completely, he was being very rude in the whole thing. Anyways, the key thing there was that we had recommended not to do this because anytime somebody comes and tries to hijack the process like this, I tell sellers all the time, I ask them a question. Why do you think they're trying to do that? Because they're trying to take advantage of the process, right? We are here to back up the seller. And so as soon as somebody does that, to me it's a red flag, right? And so we said, okay, fine. We wanted to obviously respect the seller's wishes, so we let them go through this process. And lo and behold, at the 11th hour, because of the other broker, the deal fell apart and nothing happened. And that was the only one where we actually didn't end up selling. So this person went back to the drawing board, tried to figure something else out. And the reason why that it broke down, it was so ridiculous because it was— see, again, this is where the experience of us actually being involved with landlords— it was a landlord issue where the landlord is asking for a specific security from the buyers. But we've been through that process many times. We could have told them how to limit that, how to work with, you know, obviously controlling that so that you're not liable forever. A lot of landlords will probably want to have some sort of security for new buyers, especially if they're personal, small buyers, etc. And so it's because of that, and the buyers got cold feet and they left. And that was the best offer. The other offer we lost as well, because we ended up pursuing this offer. And so, you know, that's when it broke down. And this is why now if somebody says, hey, we're doing this, I said, I'm telling you right now that this is not a good idea. It's a red flag. We need to be involved. Just have a car. I'm okay to allow people to make it a competitive process, right?

You know, versus just picking one winner, right?

Yes, they wanted to, they wanted to siphon it off. They wanted to just be themselves. They wanted to get the exclusive in there, which again, all flags that this person might or might not become a good buyer at the end of the day. So our job is to protect the seller. And in this scenario, unfortunately, the seller had different wishes and we respect, again, their wishes. But future, in the future, I don't think we'll obviously entertain that again, just because we know the outcome and we knew, predicted it and exactly what happened. Yeah.

Okay, cool. Very good. All right, let's work, let's do another share, you know, maybe you could share an example of like a larger sale, you know, something, you know, you know, something around or near like $10 million or more that recently closed.

Soroush Peyvandi. Yeah, yeah. So there's a few, I mean, there's definitely a few examples 'cause the, that I can think of, but I'll think of one of the examples that was, was really good and the process was pretty short. So this was a, I believe, also 4.5-month, 5-month process. And we took, we spent probably about 1 or 2 months to actually prep for this group. Again, remember on the private side, we're spending a little bit more time because there's a lot more things to go through. It's a lot more complex than a smaller deal. So we put a lot of time and effort to prep the package, put everything in the right order, make sure we went through all the quote unquote, add backs, and everything was clear, easy to understand. And we actually had a scenario within about 4 or 5 weeks, we got multiple, multiple offers at the table. And in that scenario, they had actually— obviously, we— all 3 offers were very different in nature. Buyers— there's 3 really good buyers at the table, and they ended up choosing obviously one of the, the buyers that they had a good connection with, and they also were happy with the number. And so they ended up going through that process and Diligence again was pretty smooth. Obviously a couple of hiccups here and there, which is very normal in diligence, but we went through that pretty quickly. And we obviously worked through what's normal, what's not normal. And again, they just submitted all the revenue documents and everything closed very quickly. So that was a really interesting deal because comparing that to another deal with, at a similar size, the negotiations took probably 3 to 4 months for the other deal.

Is this owner very organized, Alex Soroush?

So this group was very organized, very— had everything ready. They've— the— their numbers were clean. They also had very minimal add-backs, to be honest. It was a very clean business. I'll highlight the add-back scenario because there was a scenario where we had another group that went through and they had, uh, probably of the entire profit, 60% was add-backs, which was a huge number. And so that scared a lot of people.

And so why are we adding back all these fees, you know, like, right?

And Don't get me wrong. I know a lot of people—

You don't need managers working at your business?

No, no, no. It was like a lot of personal stuff. Like it was almost too much. Like it was to a point where, you know, it was way too much. And so people get scared. They're like, oh, this is a lot of risk for me. Anyways, but going back to the—

What was the revenue on this deal, Soroush?

On this deal? Yeah.

With these clinics, yeah.

This one was about $11 million.

Okay, $11 million. And what did it end up selling at?

This one, again, not to disclose the exact price, but it was over $8 million. Okay, cool. Let's leave it at that. Yeah. So yeah, but that again, I want to underscore the add-back component because that's a huge part of what we do in the private marketplace. Like everything's got to be reasonable. Right? You can't just add back everything under the sun. Buyers will also lose confidence in our process, in your clinic, if we're put— if we're way too aggressive with things. Um, because some things are necessary to the business. You can't just add it back just because you feel like, okay, we don't need to do this anymore. Or another one that, um, I want to highlight— this is a really important one— is a lot of people will tell me, well, we don't need to use our accountant anymore because they'll use their account, so we're going to add this My comment is we can try, we can, we can put it up, but their, the rebuttal is gonna be, well, we need an account, we need an expense for this clinic anyways. And so economies of scale that a larger buyer brings in, you're not gonna get credit for that, right? Because that's the whole point of how they make a spread between how much they pay for the business versus how much they get. And this is called the effective multiple. So let's say they give you, you know, 7, 8 times on your business. And they, through the transition period, they'll put in all these things to make the cost go down, to maybe they'll feed the business with more assessments or revenue. And by the end of that transition period, maybe the profit's grown like 30, 40% and the size has grown quite significantly. And when you compare that to then how much they actually paid for the business, that's their quote unquote effective multiple. So they're looking at, Okay, now went from 7x to 5x. So they made a 2x spread in the transition period. That's why buyers can— some of these bigger buyers can pay a little bit more because they're looking at the effective multiple at the end of that transition as well, right? Seeing how much they can create more spread. Plus obviously there's also the— we call it the multiple arbitrage, which is the, uh, when you have multi-locations, the multiple grows. They obviously have like lots of different clinics. So immediately if they buy yours at 7 or 8x and they sell the whole platform in the future to obviously a bigger buyer, maybe they sell that platform for 10 or 11. So now you've increased by 2x through the effective multiple by growing the business. You've also gained the multiples. So now essentially they'll get 2 times the price that they might have paid. And yeah, that's just the nature of a big buyer. Yeah.

Or if they're strategic and they're worth like 18x, right? You know, right. Then the spread.

Well, yeah, then it's even like more, right?

You know, so it's like, it's like it's, it's, they're like, oh, it's a good deal buying your business at like 8 to 10 times, right? You know?

Yeah. I mean, again, and that just to be clear, the 8 to 10 times is also much more rare because the business has to be set up really, really well. It's got to be a true platform. You've got to have a lot of your ducks in a row. And again, the market will fluctuate. You know, if you asked me in 2022 how much multiple, 1.5?

Well, I think it depends all— also depends on how much like EBITDA you bring in, right? And the deal spread. Like if you're talking about bringing in a couple of million bucks, like, yeah, you're not going after like big multiples, right? You know, but if you're bringing in like $10 million of EBITDA, like the game changes. $5 million of EBITDA, the game changes. So, you know, I just— we want to, you know, like, I think this is about like setting expectations as well, is that yes, those multiples exist, like double digits, but you're bringing in like, you know, you're bringing in like significant amount of EBITDA with geography and with the geography, number of locations, and all that stuff is what, uh, what needs to happen to get those multiples, right?

Yeah, I think the, the vet industry unfortunately created this idea and expectation around the multiples that, you know, anybody and everybody can get 12 to 15 times on their single location doing $300,000 I know, isn't that incredible?

These vets, like, you know, your business doing like $200,000, $300,000, you're getting like 12x, you know, so.

Yeah, but again, that's also cooled down because think about it like this. This is what I tell people. The reason why that happened is because there was a group trying to form a platform and, and bite market share, right? So what they'll do is they'll come in, they'll give you aggressive numbers, they'll bite as much of the market as they can, and then the rest of their acquisitions is nowhere near the 12 to 14 times. They're going to be at 3 times, maybe 4 times. right? And so that's how they, they get, they average out their multiple through the entire network. So let's say 20% of their business was the 15 to 20x, but now they've got a platform and now that platform is acquiring all these 3x businesses, 4x businesses, because now they have obviously reputation in the, in the industry. And so overall they might have actually effectively purchased everything for like 7x if you do the larger grand scheme of things, which is why I'm saying that, you know, these financial buyers coming into the healthcare space, Obviously they're not going to be giving you 12 to 15x, but as an example, they might still give you more premium numbers because they need to form this platform.

Because how early you are in, right?

Yeah, that's what I'm saying. Yeah, there's a lot of competition for that and that's the wave that you need to catch in order to do well.

Yeah, cool. Hey, Soroush, what is the top FAQs you're hearing right now from sellers?

Well, I mean, the top FAQ, we've kind of answered a few of them already, but who are the buyers, which we've already mentioned. How much is my business worth? And the question leading to that is, well, can I get an 8 to 10 times on my single location? And obviously I have to give some bad news there. And also is how fast, how fast can I actually sell? Which, again, I'll repeat this one. It totally depends on how well prepared and how clean your books are. This is why before we even put everything into the marketplace, if your books are a huge mess, then we have to work through that. We got to get explainers going, or we got to work with your bookkeeper accountant and actually clean that up. Because then that process from release to closing will be probably 50% faster if we actually have things that are clean and easy to understand versus a huge mess, just giving a bunch of numbers and hoping that they just figure it out, right? Those are usually the top 3 FAQs from—

What were the top FAQs from a buyer's perspective?

From a buyer's perspective is, you know, what's the value expectation of this business is my favorite question that every buyer loves to ask. And, you know, as we're always reasonable, so we tell people, you know, we're within market. That's my usual answer until we actually get to a point of negotiation. The other is, the other big one now is honestly, how do I get access to the private marketplace? That's been a big question because people know that it's there is this marketplace. And, you know, that's when I tell them they got to get on a call with me, we have to qualify them into the, into the actual group, and then they'll be able to see and get access.

How do you, how do you qualify that group, Soroush Peyvandi?

So it's gonna be a conversation. Obviously, we will go through obviously what their story is, we have to do a little bit of a check on, and we don't, excuse me, we do like a basic interview to just get to know you as a buyer, because a lot of sellers want to know who is getting access to their business. And then obviously, the additional layer is if if they're comfortable, is proof of funds would obviously make the process much more solidified. But that just depends on certain scenarios. If you have a big name already, and we already know you, maybe less necessary. But if you're new to the market, you're brand new to the space—

So financial strength is really important because, you know, you'll be able to cut the deal sizes and be involved with the multiple bidding process, right, for the private transactions, right?

That's right. And a lot of people in the private marketplace, they also mention, well, how much EBITDA is there too? To bite off. And usually we tell them we've got about $13 to $15 million of EBITDA. Not everyone's gone through, obviously people are in preparation. So over the next few years, those are gonna be going through the, the market. Wow.

So there's $13 to $15 million of like EBITDA in the pipeline of clinics that will likely sell in the next couple years. Is that what you're saying?

Yeah. 2 to 3 years. Yeah.

Okay. That's on the private side, right?

Soroush Peyvandi. That's on the private side. Yeah.

Okay. So all you whales who have big checks, you know, like you DM me, okay? See if you pass the interview test, right, Soroush?

That's right.

That's right. Okay, cool. I think that's good. Soroush, so how do people find out more about you or if they're interested in either buying or selling clinics?

Well, I mean, there's a couple of ways, obviously DM to you, you'll pass them off to me, but directly you can email me. With, uh, soroush@clinicaccelerator.com. So S-O-R-O-U-S-H at clinicaccelerator.com. Um, and I do have my personal Instagram, but I don't use it for the business as much. So I definitely just email me, um, or DM Rick, and we'll get in touch to, to chat. There's also a link if you go into the, um, uh, into the listing page we have. If you submit an NDA, there's also— if you're the first time, you'll go through a call process and you'll to chat with us as well that way.

Okay, amazing. Soroush, thanks for your time and coming on the show to highlight all the, all the crazy M&A and the buying and selling activity that's going on right now in the marketplace, right?

So thanks for having me. Hopefully everyone has a great, great transaction process and happy to help when we can.

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